Saturday, 20 January 2018

Cost Plus Percentage of Cost Contract

In this type of contract, instead of awarding the work on lumpsum or item rate basis, it is given on certain percentage over the actual cost of construction. The actual cost of construction is reported by the contractor and is paid to him by the owner together with a certain percentage as agreed earlier.

The contractor agrees to do the work in accordance with the drawings, specifications and other conditions of contract. In this type of contract, proper control has to be exercised by the owner in

the purchase of materials and in arranging labour. The suitability merits and demerits of this type of contract are similar to cost plus fixed fee contracts. An additional demerit is the tendency of the contractor to increase the cost of work to earn profit by way of percentage of enhanced actual cost.